In a standard Ricardian model, two countries (China and the US) produce and trade two goods (apparel and wheat). Each worker in China can produce 2 units of apparel or 5 bushels of wheat. Each worker in the US can produce 1 unit of apparel of 10 bushels of wheat. The labor endowments are 100 in China and 20 in the US. 

(a) What is the autarky relative price of apparel in China? 

(b) What is the autarky relative price of apparel in the US? 

(c) Which country has a comparative advantage in each good? 

(d) When the two countries open to free trade, draw the world relative supply curve on a diagram, with the relative supply of apparel on the horizontal axis and world relative price of apparel on the vertical axis.

Answer rating: 100% (QA)

a To determine the autarky relative price of apparel in China we compare the labor requirements for producing apparel and wheat in China The labor req... View the full answer